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Nemaizer v. Baker

June 5, 1986


Jack Baker appeals from an order in the United States District Court for the Southern District of New York (Broderick, J.) that under Fed. R. Civ. P. 60(b) granted appellees, Samuel Nemaizer et ano, relief from a judgment which, based upon appellees stipulation consenting to it, dismissed their claim with prejudice. Reversed. Judge Meskill dissents in a separate opinion.

Author: Cardamone

Before: MANSFIELD, MESKILL, and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge:

The question we are called upon to decide is whether appellees may bring an action in federal court claiming that appellant is individually liable under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 et seq. (1982), for unpaid corporate employee benefit trust funds, after appellee had previously stipulated to dismiss "with prejudice" an action raising that claim. The reason appellees advance to obtain Rule 60(b) relief from the order of dismissal is that the stipulation contemplated only a pending state claim, not a federal claim. The legal consequences of a stipulation incorporated in a court order may not be undone simply because, with the benefit of hindsight, stipulating turns out to have been an unfortunate tactic. Although obviously better informed than foresight, an argument based on hindsight is not a ground upon which a court may grant Rule 60(b) relief.


Plaintiff, Samuel Nemaizer, General Manager of the New York Coat, Suit, Dress, Rainwear and Allied Workers' Union I.L.G.W.U., originally commenced an action in January, 1984 in New York State Supreme Court to recover employee benefit trust fund contributions from appellant, Jack Baker, an officer of Sue Brett, Inc. The initial complaint alleged one cause of action under New York State Labor Law, § 198-c (1986). Sue Brett, Inc., the corporate employer, had declared bankruptcy, and the complaint alleged that appellant was personally liable for the delinquent contributions as the corporation's chief operating officer.

On February 23, 1984 appellant removed the action to the United States District Court for the Southern District of New York (Broderick, J.), alleging that the claim asserted was preempted by §§ 1132 and 1144 of ERISA. Plaintiff Nemaizer did not contest this removal, nor did he move to remand it back to state court.

Appellant Baker then moved in federal court to dismiss the complaint -- that he alleged was preempted by ERISA -- arguing that ERISA did not impose liability upon a non-signatory to a collective bargaining agreement, regardless of that individual's corporate status. During the pendency of the motion, on February 16, 1984, the New York Court of Appeals handed down Stoganovic v. Dinolfo, 61 N.Y.2d 812, 473 N.Y.S.2d 972, 462 N.E.2d 149 (1984), which held that New York Labor Law § 198-c did not provide a cause of action for recovery of unpaid employee benefit trust funds against an individual like Baker. Faced with the knowledge that he had no claim cognizable in state court, Nemaizer offered voluntarily to discontinue that lawsuit in federal court. Accordingly, the parties executed a stipulation dismissing the action "with prejudice," and it was "so ordered" by Judge Broderick on March 16, 1984.

Six months later on September 13, 1984, Nemaizer and another benefit fund trustee (appellees) brought the instant federal action alleging that appellant was individually liable under ERISA for contributions owed the fund by the corporation. The district court judge to whom the action was originally assigned indicated that he would dismiss it on res judicata grounds unless plaintiffs convinced Judge Broderick to modify the earlier "with prejudice" order to encompass only a dismissal of plaintiffs' original state law complaint.

When the matter was referred to him, Judge Broderick found that such was appellee's intent in entering the stipulation, and granted appellees' Fed. R. Civ. P. 60(b) motion relieving them from the judgment that had dismissed the state action "with prejudice," and which otherwise would have precluded them from now raising claims arising under federal law. The district court found a genuine misunderstanding had occurred concerning the stipulation's scope and that equity dictated giving appellees an opportunity to make their ERISA claims in federal court. The district court did not specify the subsection of Rule 60(b) upon which it relied.

From this determination, defendant-appellant Baker appeals. After reviewing 60(b)(1), (b)(6), and (b)(4) -- the only applicable subsections -- we conclude that none support the relief granted, and that the district court therefore abused its discretion in granting it. We reverse the judgment appealed form and dismiss plaintiffs' ERISA claim as barred by res judicata.


As written, the stipulation stated in relevant part that "this action is dismissed with prejudice and without costs against either party." A dismissal with prejudice has the effect of a final adjudication on the merits favorable to defendant and bars future suits brought by plaintiff upon the same cause of action. Wainwright Securities Inc. v. Wall St. Transcript, 80 F.R.D. 103, 105 (S.D.N.Y. 1978). Such a dismissal constitutes a final judgment with the preclusive effect of "res judicata not only as to all matters litigated and decided by it, but as to all relevant issues which could have been but were not raised and litigated in the suit." Heiser v. Woodruff, 327 U.S. 726, 735, 90 L. Ed. 970, 66 S. Ct. 853 (1946); Teltronics v. L M Ericsson Telecommunications, 642 F.2d 31, 35 (2d Cir. 1981).

A dismissal with prejudice arising out of an agreement of the parties is an adjudication of all matters contemplated in the agreement, and a court order which memorializes this agreement bars further proceedings. Here appellant removed this case to the federal court on ERISA preemption grounds and alleged in his motion to dismiss in that court that ERISA precluded appellee's recovery. The district court ordered plaintiff's action dismissed with prejudice in accordance with the stipulation. Accordingly, res judicata precluded present appellees form raising the ERISA claim in a later federal suit. See PRC Harris, Inc. v. Boeing Co., 700 F.2d 894, 896 (2d Cir.(, cert. denied, 464 U.S. 936, 104 S. Ct. 344, 78 L. Ed. 2d 311 (1983).

Appellees' complaint simply substitutes claims of ERISA violations for the previous claims of a violation of state labor law; it relies on the same operative facts. Because the identical facts pleaded in the prior state action form the basis for the new ERISA complaint, and the ERISA claim was in fact pleaded by appellant in the prior action (appellant's motion to dismiss and removal of petition), the stipulation dismissing plaintiff's "action" with prejudice must be read to have dismissed all claims. Res judicata principles preclude appellees from raising in a later action those claims that would have been decided had the first action been fully litigated. See Migra v. Warren City School District Board of Education, 465 U.S. 75, 79 L. Ed. 2d 56, 104 S. Ct. 892 (1984); Murphy v. Gallagher, 761 F.2d 878, 879 (2d Cir. 1985).

Thus, in order to maintain the instant federal action, appellees must invoke Rule 60(b) to vacate part of the initial judgment. To do that successfully, the rules governing 60(b) must be satisfied. We turn to those rules.

III FED. R. CIV. P. 60(b)

Rule 60(b) sets forth the grounds on which a court, in its discretion, can rescind or amend a final judgment or order. It provides, in pertinent part:

On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence . . . ; (3) fraud . . ., misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, ...

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